THE cost of living is on the rise again due to hikes in energy bills and food prices, figures are expected to show this week.

Consumer price inflation is predicted to have crept back up to 2.4 per cent in October after falling to a 34-month low of 2.2 per cent in September.

The expected rise will put a squeeze on the purchasing power of consumers, threatening the fledgling economic recovery. GDP rebounded by 1 per cent in the third quarter after three consecutive quarters of contraction.

The October rise would also take consumer price inflation further away from the Bank of England’s target rate of 2 per cent. However, it is still well below the 5.2 per cent level reached in September 2011, a three-year high.

Howard Archer, chief UK economist at think tank Global Insight, said: “Consumer price inflation is expected to have been pushed back up in October primarily by a rise in energy tariffs and by increased food prices. Several utility providers are increasing their energy tariffs during the fourth quarter. This started with an increase of about 9 per cent by SSE in October. Also, food prices are likely to have risen as a consequence of recent poor harvests overseas and very wet weather in the UK.”

We expect claimant-count unemployment to have edged up by 4,000 in October after falling to a 14-month low of 1.5673 million in September

Howard Archer

Archer predicts that the same pressures will mean the cost of living will hover around 2.5 per cent over the final months of 2012 and early on in 2013. However, he does not believe it will rise further than this because oil prices have softened. He said: “Our best guess is that consumer price inflation will stand at about 2.5 per cent at the end of 2012 and will not dip below 2 per cent until the second half of 2013.”

The inflation figures are part of a busy week for economic news. Labour market data may show some signs of a loss of momentum as the boost to jobs from the Olympics wanes.

Archer said: “We expect claimant-count unemployment to have edged up by 4,000 in October after falling to a 14-month low of 1.5673 million in September.” This would follow declines of 4,000 in September, 14,200 in August and 13,600 in July.

Meanwhile, retail sales are likely to have been essentially flat in October, indicating that consumers are still careful in their spending despite overall recent improvement in their purchasing power. Retail sales volumes out on Thursday are expected to have edged up by just 0.1 per cent monthon-month in October, down appreciably from September’s increase of 0.6 per cent.